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Global Healthcare Costs Likely to Increase in 2022 and Beyond

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After more than a year-long hiatus due to COVID-19 restrictions, hospitals and healthcare providers across the world are now providing more non-COVID-19 care services, including elective surgeries and cancer treatment. However, experts predict volatility in healthcare costs in 2022 and beyond. Therefore, organizations and individuals need to be prepared for the sticker shock in the near future.

The fact is, according to a new report by Willis Towers Watson, stakeholders in the healthcare industry will see intense volatility in global healthcare use and costs in the coming year and beyond. The Willis Towers Watson 2022 Global Medical Trends Survey revealed this significant volatility in cost predictions by region based on the impact of the pandemic in each region.

For instance, according to the company’s National Trend Survey, insurers expect healthcare costs to climb by 14.2% in Latin America in 2022, and in the U.S., an upshoot of 7.6% is anticipated. In the Middle East and Africa, stakeholders expect to see a 10.6% rise in healthcare costs, while an increase of 7.6% and 6.7% are expected in the Asia-Pacific region and Europe.

In fact, according to the survey, more than 75% of medical insurers expect healthcare costs to accelerate over the next three years. About 86% of insurers in Europe expect significantly higher healthcare costs over this time period, while 82% of insurers in the Middle East and Africa expect this higher medical trend as well.

But this shift isn’t accidental; it is being driven by changes to healthcare demand-and-supply dynamics induced by the coronavirus pandemic.

“COVID-19 has produced the biggest impact to global medical trend variation the industry has seen, and we expect the repercussion and volatility from it to extend into 2022 and beyond,” says Eric McMurray, global head of health and benefits at Willis Towers Watson,  “The pandemic, combined with the changing face of work, has had a significant effect on medical trends, delivery of services and the future drivers of medical claims,” he added.

The survey identified the leading drivers of medical costs to be overuse of care (64%) due to overprescribing, the barrage of unnecessary tests, and unnecessary medical interventions; increased healthcare demand by insured members (59%), and; underuse of preventive services (38%). 

In the context of the pandemic, these factors have been accentuated by the long period of stay-at-home restrictions, suspension of elective healthcare services, and more remote work offerings.

Healthcare resources will indeed be stretched post-pandemic, as insured members or even private health buyers begin to seek care for their pent-up health demands. Further, restrictions and workplace changes implemented during the pandemic, including remote work and stay-at-home orders, altered health consumer behavior, which led to increased sedentary lifestyle, reduced physical activity and increased ergonomic or work-related conditions.

Consequently, insurers named musculoskeletal conditions, cardiovascular diseases, and cancer as the three top conditions that will upshoot healthcare costs in the coming years. These three conditions increased in prevalence during the pandemic due to heightened risks and poor access to preventive and treatment services. Interestingly, respondents ranked musculoskeletal conditions as the top by the number of claims this year, climbing from the fifth position last year.

“COVID-19 has caused volatility in the trend numbers and in the leading causes of claims, as the sedentary lifestyle that often accompanies working from home has increased the risk of musculoskeletal injuries,” said Francis Coleman, managing director, Integrated & Global Solutions, Willis Towers Watson.

Coleman identified one other healthcare need that would drive cost in the near future: mental health. The pandemic has been regarded as the most stressful time by many employees, with several challenges including pay cuts, job losses, and pandemic anxiety exacerbating employee stress. 

Nonetheless, stakeholders have also identified key cost-management tools to tackle this trend of rising healthcare costs. About 75% of survey respondents said direct contracting with networks or providers for all treatments is the most effective cost-saving measure, while preapproval or scheduled inpatient services (67%) and telehealth services (63%) ranked second and third most efficient cost management tools.

In fact, telemedicine jumped to the third spot from the fifth position in 2020, signaling the rapid uptake of digital healthcare. Digital platforms became the new doctor’s office during the pandemic as health providers restricted clinics and wards to patients with COVID-19 or COVID-10-related health challenges. In time, telemedicine saw rapid spread across hospitals and health systems, and it has demonstrated considerable cost savings for health buyers and payers and resource management for health providers.

“Telehealth’s momentum will be sustained post-pandemic. In fact, the role of telehealth will continue to evolve not only as a navigation tool to speed access to the right care but also as a means to close gaps in access to care,” Coleman said.

Coleman added that the rising cost of medical coverage globally will mean higher medical expenditure by US employers. What used to be a small percentage of US costs will now be a significant portion as the demand for private healthcare from global employees spikes.

“With that, the medical spend is growing rapidly outside of the US and it is becoming a larger and larger part of [an organization’s] overall rewards budget,” Coleman says. “This accelerating medical trend also has a secondary effect on other parts of the compensation budget, such as merit pay increases. Consequently, U.S. employers need to be vigilant on their worldwide medical spend, not just their US budget.”

For now, stakeholders in the healthcare industry are preparing for this upswing in medical costs while monitoring the trend and implementing cost-efficient strategies to manage this challenge, including direct contracting with medical travel programs. 

Jonathan Edelheit, Chairman of the Medical Tourism Association and Global Healthcare Resources, “We are going to see more rapid adoption of medical tourism by cash-paying consumers, but also insurance companies and employers. Companies need to save money, and a lot of organizations have saved millions by incentivizing their plan members to travel abroad for major surgeries like orthopedics.”

The biggest area of growth Edelheit feels we will see is in therapeutics, infusion therapy, and specialty drugs.  “The costs are too high in the US and a lot of the developed world. Companies have been experimenting for years sending employees and their spouses for long vacations and realizing savings of 50% on treatment that could cost $50,000 to $300,000 in the US. As drug prices also increase companies will be forced to turn to medical travel as a viable alternative in order to stay profitable and keep competitive,” Edelheit said.

The emergence of new coronavirus variants and more restrictions being implemented across the world means these cost drivers may continue to disrupt global healthcare for longer than we expect. Therefore, employers and health payers must leverage effective cost-saving measures to navigate the crisis and ensure patients can access the best of care from around the world.

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